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In the tech world, fortunes can turn in a flash. During the 1990s, Microsoft shares enjoyed explosive growth thanks to the popularity of its Windows operating system for personal computers.

The money continued to pour in as the Wintel alliance of Microsoft’s software and Intel (INTC) chips became the de facto global standard for the PC industry.

Microsoft shares adrift

Microsoft looked unbeatable until it wasn’t. Its market cap peaked during the dot.com bubble, then slumped and drifted for years. By the mid-2000s, Microsoft (MSFT) seemed stuck in the mire. Meanwhile, Apple (AAPL) started to take consumers by storm with the launch of its iPod, iPad and iPhone franchises.

Trading Places

More broadly, the growth of desktop PC sales started to slow as the action shifted more to high-powered tablets and smartphones. Apple’s market value took off even as investors became more disenchanted with Microsoft.

Cloud Computing

Flash forward to 2018: Under the leadership of CEO Satya Nadella, the Microsoft shares are now enjoying a major comeback, thanks to the growth of its cloud computing business. Its PC-related business is also enjoying surprising growth.

As a result, Microsoft’s market value is now nose-to-nose with that of Apple.

In fact, Apple looks like the company losing momentum this time around, with investor concerns about its slowing iPhone business and exposure to China amid a global trade war.

Takeaway

Another way to examine the competitive dynamics between Apple and Microsoft is to look at the spread between the two companies’ market caps going back to 1986.

That’s what the analysts at Bespoke Investment Group did in the chart below: Apple’s market value has really slumped in recent months, while Microsoft shares have bounded from strength to strength.

The lesson for investors? In my view, the only constant in the tech world is non-stop change.

This material is from Interactive Advisors Asset Management and is being posted with Interactive Advisor Asset Management’s permission. The views expressed in this material are solely those of the author and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

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Xavier Brenner

Xavier Brenner

Xavier Brenner has covered global market, business and economic trends since 2013 for Interactive Advisors, a robo-advisor offering actively and passively managed portfolios and a division of the Interactive Brokers Group.

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